Forensic Accounting Methods
A fraud can be uncovered in many different ways. A good example is by the routine activities of the internal audit team or alternatively by a whistleblower who who might inform his managers that a colleague has been fraudulently stealing from the company. Corporate fraud needs to be investigated quickly in order to prevent further damage affecting the organization and to find out how the fraud happened in the first place. It may be possible to recover any losses that have taken place by tracing them from the company to their destination.
A specialist fraud investigator is consistent with such a task and it is usually the case that the victim company will enlist the services of a qualified forensic accountant. Such a person will be recognized by one or more professional bodies to investigate a fraud matter. He or she may be a Chartered Accountant or a Certified Fraud Examiner with possibly other qualifications together with many years of experience dealing with such cases.
Every fraud is different. There are various distinguishing characteristics to be found between, for example bank fraud, insurance fraud and mortgage fraud. Even in these categories there may be many possibilities for different problems because the fraudster is very resourceful in seeking out new and different weaknesses in a business.
The investigator will approach the discovered fraud by first determining what the organisation wants to get out of the investigation. This might be simply to get the money back or it might want to make an example of the fraudster as a lesson to others. If it just wants to get its losses back it may not welcome law enforcement investigating as this might disrupt its business or cause its reputation to be damaged. For example a bank might not want the general public to know that it had allowed a fraudster to work in its midst.
The forensic accountant or certified fraud examiner will want to plan a result of problems with the company and develop an investigation strategy based upon any contingency policy or “fraud response plan”. It may be possible to interview the whistleblower early on to get a quick “heads up” into what was going wrong before beginning a detailed analysis of the accounting records, interviewing staff and making other enquiries often outside the organisation.
For the actual approach to the investigation the forensic accountant will probably want to follow the trail of the stolen money. “Follow the money” will be the primary goal as this will provide not only a chance of getting the money back, but also evidence of why and how the fraud took place.